Shares of ICICI Lombard General Insurance Company surged over 14 percent in intra-day deals on Monday, rising the most since March 2020, after ICICI Bank decided to increase its stake in the insurance firm, officially making it a subsidiary.
The Board of Directors approved an increase in shareholding in the company, in multiple tranches by up to 4 percent, the company said in a BSE filing. It further added that ICICI Bank would acquire at least 2.5 percent stake out of the above 4 percent before September 9, 2024.
As of March 2023, ICICI Bank’s stake in ICICI Lombard stood at 48.02 percent. This move will raise ICICI Bank's stake in ICICI Lombard to 50.52 percent. It is important to note that according to the RBI guidelines, banks can hold either less than 30 percent or over 50 percent in insurance subsidiaries.
Earlier, the lender had sought to reduce its stake in the general insurer to below 30 percent, keeping in accordance with the RBI guidelines. It had requested a delay in diluting the stake until September 9, 2024, which was granted by the market regulator.
The stock rallied as much as 14.2 percent to its day's high of ₹1,256.70 on the news reports.
The stock is now just 8 percent away from its 52-week high of ₹1,369, hit on August 17, 2022. Meanwhile, it is up almost 20 percent from its 52-week low of ₹1,049, hit on March 16, 2023.
In the last one year, the stock is down over 12 percent, whereas in 2023 YTD, it has gained around 1.6 percent. It has advanced 13 percent in May so far after a 1 percent rise in April. However, in the first 3 months of the calendar year, the stock was in the red. It fell 6.6 percent, 2.5 percent and 2.9 percent in January, February and March, respectively.
Apart from ICICI Bank, the RBI had also given HDFC Bank permission to increase its stake in HDFC Life Insurance and HDFC Ergo General Insurance above 50 percent before its merger went into effect.